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CALGARY, AB, July 30, 2020 /CNW/ - Surge Energy Inc. ("Surge"
or the "Company") (TSX: SGY) is pleased to announce its financial
and operating results for the quarter ended June 30, 2020.
CORPORATE UPDATE - CRUDE PRICE FUNDAMENTALS IMPROVING
1. Managing The Pandemic:
Surge's management team has an established track record of
making proactive capital allocation decisions to protect
stakeholder's capital.
When oil prices were over US $63
WTI in late 2019/early 2020, Surge systematically layered in WTI
crude oil hedges in order to lock-in 2020 oil prices at attractive,
pre-COVID levels. As two Black Swan events (i.e. COVID-19, and the
Saudi/Russia oil price war)
occurred simultaneously in 1H/20, causing crude prices to drop to
US $11.57 WTI per bbl on April 21, 2020, Surge management acted decisively
to preserve stakeholder's capital by:
- Being the first public oil company in Canada to suspend its dividend;
- Cutting capital expenditures quickly in Q1/20;
- Being the first public oil company in Canada to shut-in meaningful lower netback
production (approximately 21 percent); and
- Focusing on rigorous cost cutting measures.
In 1H/20, managements strategic hedging program worked very
well, with Surge reporting a realized hedging gain of $29 million. Accordingly, Surge was actually able
to reduce net debt1 in both Q2/20 and 1H/20 – during the
COVID-19 crisis, and during the Saudi/Russia crude oil price war.
In addition, with crude prices now recovering, Surge forecasts
net debt to drop meaningfully throughout 2H/20 at strip oil
prices.
2. Crude Prices Are Rallying:
Pre-COVID-19, world oil demand was more than 100 million barrels
per day; growing by approximately one million barrels per day each
year. Without significant capital investment, world oil production
has been estimated to have an annual decline of 6-7 million barrels
per day.2
COVID-19 fears, the Saudi/Russia oil price war, and the subsequent spike
down in world crude oil prices in 1H/20, triggered significant,
world-wide upstream capital spending reductions for crude oil
drilling and associated projects both large and small. In this
regard, US and Canadian oil rig counts plunged to multi-decade lows
in June/20:
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Crude oil prices have now risen by more than 240 percent in just
the last 3.5 months to approximately US$40 WTI per bbl, and the 2020 forward strip for
oil prices has moved up in tandem to US$41 per bbl.
Against this backdrop of crude oil price fundamentals improving,
it is important to stress that Surge possesses 3 of the key
operational indicia for highly successful oil companies,
namely:
- A very low annual corporate decline (less than 19 percent per
year);
- Top tier production efficiencies (Sparky PE's are
<$10,000 boepd on an IP90 basis);
and
- High operating netbacks3 (Surge's entire Sparky core
area operating netback (unhedged) for the month of June/20 was
$27 per boe @ US$38 per bbl WTI pricing).
Q2 2020 FINANCIAL HIGHLIGHTS
While the COVID-19 crisis and the Saudi/Russia crude oil price war drove WTI crude oil
prices to an average of US$27.85 per
barrel in Q2/20, Surge was actually able to reduce net debt in
Q2/20, as well as 1H/20.
Surge realized over $15 million in
hedging gains in the second quarter of 2020 pursuant to the
Company's ongoing strategic hedging program, and $29 million in hedging gains during the first
half of 2020. In addition, the Company has continued to execute on
attractive crude oil hedges for 2021, as well as natural gas hedges
for fall and winter 2020 and calendar 2021.
With crude oil prices having increased more than 240 percent
from the April 21, 2020 low of
US$11.57 WTI per barrel, Surge began
to bring curtailed production back on in June. Management's
expectation is that, based on current oil prices, the Company will
have virtually all curtailed production back on by mid-August.
Surge's ability to restart production is not simply due to
increasing oil prices, but also driven by field cost optimization
work (i.e. lowering the break-even price for several of the
Company's higher cost properties).
Surge is currently participating in (or exploring) all
applicable Government assistance programs relating to the COVID-19
pandemic. The Company has received $2.9
million for the Alberta Site Rehabilitation Program
("SRP").
Surge remains committed to its own internal ESG initiatives and
currently expects to spend an additional $2
million in 2H/20 (over and above any grants received through
the SRP).
FINANCIAL AND OPERATING HIGHLIGHTS
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
($000s except per
share amounts)
|
2020
|
2019
|
%
Change
|
|
2020
|
2019
|
%
Change
|
Financial
highlights
|
|
|
|
|
|
|
|
Oil sales
|
28,432
|
104,387
|
(73)%
|
|
89,643
|
195,515
|
(54)%
|
NGL sales
|
644
|
1,649
|
(61)%
|
|
1,707
|
4,074
|
(58)%
|
Natural gas
sales
|
1,429
|
1,629
|
(12)%
|
|
2,861
|
5,944
|
(52)%
|
Total oil, natural
gas, and NGL revenue
|
30,505
|
107,665
|
(72)%
|
|
94,211
|
205,533
|
(54)%
|
Cash flow from
operating activities
|
2,970
|
45,807
|
(94)%
|
|
46,108
|
74,715
|
(38)%
|
Per share - basic
($)
|
0.01
|
0.15
|
(93)%
|
|
0.14
|
0.24
|
(42)%
|
Adjusted funds
flow*
|
8,854
|
50,742
|
(83)%
|
|
38,882
|
92,593
|
(58)%
|
Per share - basic
($)*
|
0.03
|
0.16
|
(81)%
|
|
0.12
|
0.30
|
(60)%
|
Net loss**
|
(61,159)
|
(2,611)
|
2,242 %
|
|
(676,386)
|
(10,594)
|
6,285 %
|
Per share basic
($)
|
(0.18)
|
(0.01)
|
1,700 %
|
|
(2.03)
|
(0.03)
|
6,667 %
|
Total exploration and
development expenditures
|
3,516
|
25,197
|
(86)%
|
|
36,020
|
66,458
|
(46)%
|
Total acquisitions
& dispositions
|
(5,276)
|
(29,166)
|
(82)%
|
|
(5,276)
|
(56,973)
|
(91)%
|
Total capital
expenditures
|
(1,760)
|
(3,969)
|
(56)%
|
|
30,744
|
9,485
|
224 %
|
Net debt*, end of
period
|
376,907
|
391,020
|
(4)%
|
|
376,907
|
391,020
|
(4)%
|
|
|
|
|
|
|
|
|
Operating
highlights
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
Oil (bbls per
day)
|
13,813
|
17,366
|
(20)%
|
|
15,352
|
17,454
|
(12)%
|
NGLs (bbls per
day)
|
528
|
727
|
(27)%
|
|
546
|
685
|
(20)%
|
Natural gas (mcf per
day)
|
16,664
|
20,706
|
(20)%
|
|
17,036
|
20,685
|
(18)%
|
Total (boe per day)
(6:1)
|
17,118
|
21,544
|
(21)%
|
|
18,737
|
21,587
|
(13)%
|
Average realized
price (excluding hedges):
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
22.62
|
66.05
|
(66)%
|
|
32.08
|
61.89
|
(48)%
|
NGL ($ per
bbl)
|
13.41
|
24.93
|
(46)%
|
|
17.19
|
32.84
|
(48)%
|
Natural gas ($ per
mcf)
|
0.94
|
0.86
|
9 %
|
|
0.92
|
1.59
|
(42)%
|
|
|
|
|
|
|
|
|
Netback ($ per
boe)
|
|
|
|
|
|
|
|
Petroleum and natural
gas revenue
|
19.58
|
54.92
|
(64)%
|
|
27.63
|
52.60
|
(47)%
|
Realized gain (loss)
on commodity and FX contracts
|
9.93
|
(1.29)
|
(870)%
|
|
8.50
|
(0.83)
|
(1,124)%
|
Royalties
|
(2.06)
|
(7.03)
|
(71)%
|
|
(3.44)
|
(6.36)
|
(46)%
|
Net operating
expenses*
|
(14.50)
|
(14.03)
|
3 %
|
|
(14.39)
|
(14.58)
|
(1)%
|
Transportation
expenses
|
(1.70)
|
(1.33)
|
28 %
|
|
(1.67)
|
(1.66)
|
1 %
|
Operating
netback*
|
11.25
|
31.24
|
(64)%
|
|
16.63
|
29.17
|
(43)%
|
G&A
expense
|
(1.99)
|
(1.86)
|
7 %
|
|
(1.91)
|
(1.82)
|
5 %
|
Interest
expense
|
(3.57)
|
(3.48)
|
3 %
|
|
(3.31)
|
(3.66)
|
(10)%
|
Adjusted funds
flow*
|
5.69
|
25.90
|
(78)%
|
|
11.41
|
23.69
|
(52)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding, end of period
|
335,069
|
314,051
|
7 %
|
|
335,069
|
314,051
|
7 %
|
Weighted average
basic shares outstanding
|
335,069
|
314,010
|
7 %
|
|
333,628
|
311,742
|
7 %
|
Stock option
dilution
|
—
|
—
|
—%
|
|
—
|
—
|
—%
|
Weighted average
diluted shares outstanding
|
335,069
|
314,010
|
7 %
|
|
333,628
|
311,742
|
7 %
|
*
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
**
|
For the six months
ended June, 2020, the Company incurred a net loss of $676.4
million, including a non-cash asset impairment charge of $590.6
million recognized in the first quarter of 2020 primarily due to a
decrease in the average independent engineering price forecasts.
The impairment charge does not impact the Company's adjusted funds
flow, and is reversible in future periods should there be any
indicators that the value of the assets has increased.
|
OPERATIONS UPDATE
1. Focus on the Sparky:
Surge's Sparky play has now emerged as one of the premium,
conventional, medium/light crude oil growth plays in Canada. The Company has now drilled 138
consecutive successful horizontal Sparky
wells4, and grown production in its Sparky core
area by more than 650% from 1,200 boepd (95% oil) to more than
9,000 boepd (95% oil), over the last 6 years.
Surge's 19 well Sparky drilling program in 1H/20 delivered more
than 2,500 boepd of estimated total production additions, for
"all-in" capital expenditures of $22
million - providing production efficiencies of $8,800 per boepd (IP-90).
In Q4/19 and Q1/20 Surge drilled a combined total of 27 Sparky
horizontal wells, and the average from these wells is outperforming
the weighted average of the Company's independently engineered
Sproule type curve. The Company has also recently completed an
internal technical review which determined that production from the
200m infill Sparky horizontal wells
is statistically identical to that of the original primary wells
that were spaced at 400m. Surge's
Sparky drilling results are set forth below:
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Due to the Sparky's large OOIP per section, shallow depths, and
low on-stream costs, a Sparky well generates a risked rate of
return of 145% (undiscounted) at US$45 WTI per barrel flat
pricing5.
Surge's Sparky core area now constitutes approximately 50
percent of the Company's total production. Today, the Company has
an internally estimated 12+ year Sparky drilling inventory of
approximately 500 net locations5.
2. Prolific, Conventional Montney Light Oil
Play:
At the Valhalla core area, in
Q4/19 Surge drilled the Company's first Montney horizontal well into Surge's large
OOIP Montney turbidite pool - which is a conventional light oil
pool. This well had an IP30 oil rate of more than 1,000 bopd, has
cumulative production of over 132,000 barrels of oil in 6 months
(IP 180 of 735 bopd), and continues to produce at more than 500
bopd today.
Surge has a number of follow-up Montney turbidite locations at Valhalla.5
OUTLOOK – POSITIONING FOR THE OIL PRICE
TURNAROUND
In 2019, with US WTI crude oil prices averaging US$57 WTI per bbl, Surge maintained the Company's
annual production (cost effectively), paid its prior dividend
(using just 17 percent of the Company's adjusted funds
flow6), and reduced net debt by $79 million.
When the two Black Swan events of COVID-19 and the
Saudi/Russia crude oil price war
occurred simultaneously in 1H/20, Surge management's priority
turned decisively to preserving stakeholder capital.
As discussed above, the Company's strategic hedging program
worked very well; Surge's net debt is now forecast to drop
meaningfully throughout 2020 at strip oil prices.
Today, crude oil prices are up over 240 percent in 3.5 months to
approximately US$40 WTI per barrel,
and strip oil prices have moved up in tandem to US$41 per barrel.
In addition, Surge's scalable, medium/light gravity Sparky crude
oil play provides shareholders the opportunity to benefit from the
proven production growth associated with this premium, low cost
conventional asset. Management believes that Surge's premium Sparky
growth oil asset is unique within the Company's entire peer group
in Canada.
COVID-19: PROTECTING STAFF, FAMILIES, SERVICE PROVIDERS,
STAKEHOLDERS AND THE PUBLIC
In response to the rapidly evolving COVID-19 pandemic, Surge has
taken appropriate steps to protect its staff, their families,
service providers, stakeholders, and the general public. Health and
safety is our number one priority and we have a dedicated team
working on proactive measures to limit COVID-19 from negatively
impacting our employees and business.
Surge has taken steps to slow the spread of the virus, including
heeding the government's advice for physical distancing. We closed
our Calgary office for over three
months and staff seamlessly transitioned to working remotely. Staff
have now returned staff to work at the office with safety measures
in place. We have mitigation plans in place for all field
operations staff across Western
Canada. These measures protect their health while they work
diligently to ensure the safety and security of our facilities as
well as continuing to deliver reliable production. In addition,
Surge has proactively implemented enhanced cleaning and sanitation
measures at all company work locations.
We are continuing to monitor the situation, taking guidance from
health authorities, and looking for opportunities to participate in
any activities that will slow the spread of the virus and "flatten
the curve". We thank our staff, their families, our partners, and
the communities in which we operate, for their participation in
these proactive measures.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements. The use
of any of the words "anticipate", "continue", "estimate", "expect",
"may", "will", "project", "should", "believe" and similar
expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements.
More particularly, this press release contains statements
concerning: the ability of management to protect stakeholder's
capital; projected decrease in the Company's net debt in 2H/20;
potential worldwide decline in oil production; 2020 forward strip
oil prices; management's expectations and plans with respect to the
development of its assets and the timing thereof; Surge's assets
and performance, the characteristics thereof, and the potential for
shareholders to benefit from such assets; drilling inventory of
Surge; possession by Surge of certain key operational indicia of
highly successful oil companies; Surge's operational and financial
flexibility for the balance of 2020; the ability of Surge to
maximize corporate cash flows; Surge's declared focus and primary
goals; the impacts of COVID-19 on our business and measures taken
in response thereto; the societal, economic and governmental
response to COVID-19; the continued participation and exploration
by Surge in all applicable Government assistance programs relating
to COVID-19, and additional funding expected to be received by
Surge as a result of such programs; Surge's continued commitment to
ESG initiatives; Surge's capital expenditure program and its
flexibility to make adjustments thereto; Surge's current and
potential production curtailments and its ability to restart such
production; Surge's cost reduction efforts and the anticipated
results and benefits therefrom; commodity prices and management's
ability to react to changes thereto; Surge's risk management
program; Surge's hedging program and the characteristics thereof;
the ability of Surge to continue to execute attractive hedges for
2020/2021; the select working-over of wells by Surge; and the
suspension of Surge's dividend and the timing for
reimplementation.
The forward-looking statements are based on certain key
expectations and assumptions made by Surge, including expectations
and assumptions the performance of existing wells and success
obtained in drilling new wells; anticipated expenses, cash flow and
capital expenditures; the application of regulatory and royalty
regimes; prevailing commodity prices and economic conditions;
development and completion activities; the performance of new
wells; the successful implementation of waterflood programs; the
availability of and performance of facilities and pipelines; the
geological characteristics of Surge's properties; the successful
application of drilling, completion and seismic technology; the
determination of decommissioning liabilities; prevailing weather
conditions; exchange rates; licensing requirements; the impact of
completed facilities on operating costs; the availability and costs
of capital, labour and services; and the creditworthiness of
industry partners.
Although Surge believes that the expectations and assumptions on
which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because Surge can give no assurance that they will prove
to be correct. Since forward-looking statements address future
events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors and
risks. These include, but are not limited to, risks associated with
the condition of the global economy, including trade, public health
(including the impact of COVID-19) and other geopolitical risks;
risks associated with the oil and gas industry in general (e.g.,
operational risks in development, exploration and production;
delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses, and health, safety and
environmental risks); commodity price and exchange rate
fluctuations and constraint in the availability of services,
adverse weather or break-up conditions; uncertainties resulting
from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures; and
failure to obtain the continued support of the lenders under
Surge's bank line as a result of fluctuating commodity prices
and reserve determinations by the lenders or otherwise.
Certain of these risks are set out in more detail in Surge's AIF
dated March 9, 2020 and in Surge's
MD&A for the period ended December 31,
2019, both of which have been filed on SEDAR and can be
accessed at www.sedar.com.
The forward-looking statements contained in this press release
are made as of the date hereof and Surge undertakes no obligation
to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
Oil and Gas Advisories
The term "boe" means barrel of oil equivalent on the basis of 1
boe to 6,000 cubic feet of natural gas. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 1 boe
for 6,000 cubic feet of natural gas is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
"Boe/d" and "boepd" mean barrel of oil equivalent per day. "Bbl"
means barrel of oil. "Bopd" and "bbl/d" means barrels of oil per
day. "NGLs" means natural gas liquids.
This press release contains certain oil and gas metrics and
defined terms which do not have standardized meanings or standard
methods of calculation and therefore such measures may not be
comparable to similar metrics/terms presented by other issuers and
may differ by definition and application.
Original Oil in Place ("OOIP") means Discovered Petroleum
Initially In Place ("DPIIP"). DPIIP is derived by Surge's internal
Qualified Reserve Evaluators ("QRE") and prepared in accordance
with National Instrument 51-101 and the Canadian Oil and Gas
Evaluations Handbook ("COGEH"). DPIIP, as defined in COGEH, is that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations prior to production. The
recoverable portion of DPIIP includes production, reserves and
Resources Other Than Reserves (ROTR). OOIP/DPIIP and potential
recovery rate estimates are based on current recovery technologies.
There is significant uncertainty as to the ultimate recoverability
and commercial viability of any of the resource associated with
OOIP/DPIIP, and as such a recovery project cannot be defined for a
volume of OOIP/DPIIP at this time. "Internally estimated" means an
estimate that is derived by Surge's internal QRE's and prepared in
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities. All internal estimates
contained in this new release have been prepared effective as of
Jan 1, 2020.
Drilling Inventory
This press release discloses drilling locations in two
categories: (i) booked locations; and (ii) unbooked locations.
Booked locations are proved locations and probable locations
derived from an internal evaluation using standard practices as
prescribed in the Canadian Oil and Gas Evaluations Handbook and
account for drilling locations that have associated proved and/or
probable reserves, as applicable.
Unbooked locations are internal estimates based on prospective
acreage and assumptions as to the number of wells that can be
drilled per section based on industry practice and internal review.
Unbooked locations do not have attributed reserves or resources.
Unbooked locations have been identified by Surge's internal
certified Engineers and Geologists (who are also Qualified Reserve
Evaluators) as an estimation of our multi-year drilling activities
based on evaluation of applicable geologic, seismic, engineering,
production and reserves information. There is no certainty that the
Company will drill all unbooked drilling locations and if drilled
there is no certainty that such locations will result in additional
oil and gas reserves, resources or production. The drilling
locations on which the Company actually drills wells will
ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While certain of the unbooked
drilling locations have been de-risked by drilling existing wells
in relative close proximity to such unbooked drilling locations,
the majority of other unbooked drilling locations are farther away
from existing wells where management has less information
about the characteristics of the reservoir and therefore there is
more uncertainty whether wells will be drilled in such locations
and if drilled there is more uncertainty that such wells will
result in additional oil and gas reserves, resources or
production.
The Company's Sparky core area has 184 net booked locations, of
which 137 net are Proved locations and 47 net are Probable
locations based on 2019YE reserves.
The Company has 9 net Montney
booked locations, of which 8 net are Proved locations and 1 net
Probable location based on 2019YE reserves.
Surge's internally used type curves were constructed using a
representative, factual and balanced analog data set, as of
January 1, 2020. All locations
were risked appropriately, and EUR's were measured against OOIP
estimates to ensure a reasonable recovery factor was being achieved
based on the respective spacing assumption. Other assumptions, such
as capital, operating expenses, wellhead offsets, land
encumbrances, working interests and NGL yields were all reviewed,
updated and accounted for on a well by well basis by Surge's
Qualifies Reserve Evaluators. All type curves fully comply
with Part 5.8 of the Companion Policy 51 – 101CP. Sparky well
economics of a 145% risked rate of return (undiscounted) @
$45 WTI, assume 113 mboe EUR per
well, $1.15 MM/well (Drill, Complete,
Equip & Tie-in), and a $25/boe
netback.
Non-GAAP Financial Measures
Certain secondary financial measures in this press release –
namely, "adjusted funds flow", "adjusted funds flow per share",
"net debt", "net operating expenses", "operating netback", and
"adjusted funds flow per boe" are not prescribed by GAAP. These
non-GAAP financial measures are included because management uses
the information to analyze business performance, cash flow
generated from the business, leverage and liquidity, resulting from
the Company's principal business activities and it may be useful to
investors on the same basis. None of these measures are used to
enhance the Company's reported financial performance or position.
The non-GAAP measures do not have a standardized meaning prescribed
by IFRS and therefore are unlikely to be comparable to similar
measures presented by other issuers. They are common in the reports
of other companies but may differ by definition and application.
All non-GAAP financial measures used in this document are defined
below:
Adjusted Funds Flow & Adjusted Funds Flow per
Share
The Company adjusts cash flow from operating activities in
calculating adjusted funds flow for changes in non-cash working
capital, decommissioning expenditures and cash settled transaction
and other costs. Management believes the timing of collection,
payment or incurrence of these items involves a high degree of
discretion and as such may not be useful for evaluating Surge's
cash flows.
Changes in non-cash working capital are a result of the timing
of cash flows related to accounts receivable and accounts payable,
which management believes reduces comparability between periods.
Management views decommissioning expenditures predominately as a
discretionary allocation of capital, with flexibility to determine
the size and timing of decommissioning programs to achieve greater
capital efficiencies and as such, costs may vary between periods.
Transaction and other costs represent expenditures associated with
acquisitions, which management believes do not reflect the ongoing
cash flows of the business, and as such reduces comparability. Each
of these expenditures, due to their nature, are not considered
principal business activities and vary between periods, which
management believes reduces comparability.
Adjusted funds flow per share is calculated using the same weighted average basic and diluted shares used in calculating
income per share.
The following table reconciles cash flow from operating
activities to adjusted funds flow and adjusted funds flow per share
for the three and six months ended June 30,
2020:
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
($000s except per
share amounts)
|
2020
|
2019
|
|
2020
|
2019
|
Cash flow from
operating activities
|
2,970
|
45,807
|
|
46,108
|
74,715
|
Change in non-cash
working capital
|
5,733
|
3,126
|
|
(9,015)
|
14,168
|
Decommissioning
expenditures
|
151
|
1,111
|
|
1,691
|
2,818
|
Cash settled
transaction and other costs
|
—
|
698
|
|
98
|
892
|
Adjusted funds
flow
|
$
|
8,854
|
$
|
50,742
|
|
$
|
38,882
|
$
|
92,593
|
Per share -
basic
|
$
|
0.03
|
$
|
0.16
|
|
$
|
0.12
|
$
|
0.30
|
Net Debt
There is no comparable measure in accordance with IFRS for net
debt. Net debt is calculated as bank debt plus the liability
component of the convertible debentures plus or minus working
capital, however, excluding the fair value of financial contracts,
decommissioning obligations and lease and other obligations. This
metric is used by management to analyze the level of debt in the
Company including the impact of working capital, which varies with
timing of settlement of these balances.
Net Operating Expenses
|
|
|
As
at
|
($000s)
|
Jun 30,
2020
|
Mar 31,
2020
|
Jun 30,
2019
|
Bank debt
|
(306,549)
|
(305,804)
|
(319,503)
|
Accounts
receivable
|
27,503
|
29,738
|
38,310
|
Prepaid expenses and
deposits
|
5,828
|
4,672
|
8,113
|
Accounts payable and
accrued liabilities
|
(33,782)
|
(43,718)
|
(47,771)
|
Convertible
debentures
|
(69,907)
|
(69,295)
|
(67,552)
|
Dividends
payable
|
—
|
(279)
|
(2,617)
|
Total
|
$
|
(376,907)
|
$
|
(384,686)
|
$
|
(391,020)
|
Net operating expenses are determined by deducting processing
and other revenue primarily generated by processing third party
volumes at processing facilities where the Company has an ownership
interest. It is common in the industry to earn third party
processing revenue on facilities where the entity has a working
interest in the infrastructure asset. Under IFRS this source of
funds is required to be reported as revenue. However, the Company's
principal business is not that of a midstream entity whose
activities are dedicated to earning processing and other
infrastructure payments. Where the Company has excess capacity at
one of its facilities, it will look to process third party volumes
as a means to reduce the cost of operating/owning the facility. As
such, third party processing revenue is netted against operating
costs in the MD&A.
Operating Netback & Adjusted Funds
Flow Netback
Operating netback and
adjusted funds flow per boe for the
three and six months ended June 30,
2020 are calculated on a per unit basis
as follows:
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
($000s)
|
2020
|
2019
|
|
2020
|
2019
|
Petroleum and natural
gas revenue
|
30,505
|
107,665
|
|
94,211
|
205,533
|
Processing and other
income
|
1,112
|
783
|
|
2,832
|
1,257
|
Royalties
|
(3,215)
|
(13,788)
|
|
(11,720)
|
(24,849)
|
Realized gain (loss)
on commodity and FX contracts
|
15,464
|
(2,537)
|
|
28,973
|
(3,253)
|
Operating
expenses
|
(23,706)
|
(28,297)
|
|
(51,905)
|
(58,210)
|
Transportation
expenses
|
(2,641)
|
(2,616)
|
|
(5,687)
|
(6,479)
|
Operating
netback
|
17,519
|
61,210
|
|
56,704
|
113,999
|
G&A
expense
|
(3,102)
|
(3,652)
|
|
(6,518)
|
(7,122)
|
Interest
expense
|
(5,563)
|
(6,816)
|
|
(11,304)
|
(14,284)
|
Adjusted funds
flow
|
8,854
|
50,742
|
|
38,882
|
92,593
|
Barrels of oil
equivalent (boe)
|
1,557,700
|
1,960,535
|
|
3,410,114
|
3,907,211
|
Operating netback
($ per boe)
|
$
|
11.25
|
$
|
31.24
|
|
$
|
16.63
|
$
|
29.17
|
Adjusted funds
flow ($ per boe)
|
$
|
5.69
|
$
|
25.90
|
|
$
|
11.41
|
$
|
23.69
|
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts
responsibility for the adequacy or accuracy of this release.
_________________________________
|
1
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document
|
2
|
SAF Group; Research;
June 20, 2019: www.safgroup.ca
|
3
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
4
|
A successful Sparky
well has an IP180 > 50 bbl/d
|
5
|
See Drilling
Locations in Forward Looking Statements
|
6
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
SOURCE Surge Energy Inc.